GCC Mobile Phone Market Seasonal Relief Likely Short-Lived

March 6, 2018

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The Gulf Cooperation Council (GCC) mobile phone market experienced mild seasonal growth in Q4 2017, according to the latest figures announced today by International Data Corporation (IDC). The global technology research and consulting firm’s newly released Quarterly Mobile Phone Tracker shows overall shipments for the quarter totaled 6.6 million units, reflecting an increase of 2.1% quarter on quarter (QoQ).

The market’s growth in Q4 2017 was driven by strong shipments of feature phones, which increased 10.6% QoQ and helped to offset the 2.0% decline in smartphones shipments. This inverse trend characterized the market throughout 2017, with feature phone shipments increasing by an average of 11.4% in each of the previous three quarters, while smartphone shipments fell by a quarterly average of 2.7% over the same period. Nokia’s introduction of numerous new feature-phone series throughout the year has been the major driving force behind the growth of this category.

The UAE was the region’s top-performing market in Q4 2017, with mobile phone shipments to the country increasing 12.3% QoQ. Bahrain and Kuwait also saw QoQ growth, with shipments up 7.1% and 2.7%, respectively. However, Qatar, Oman, and Saudi Arabia all experienced QoQ declines, with mobile phone shipments down 5.2%, 2.0%, and 0.8%, respectively, in Q4 2017. Qatar is undergoing adjustments as the channel is facing issues with import embargos due to macro-political factors, while the Saudi market is still coming to terms with the introduction of various new government regulations.

It is interesting to note that Saudi Arabia’s smartphone shipments have been declining for three consecutive quarters, resulting in a 13% year-on-year (YoY) drop in shipments for 2017 as a whole. “The Saudi market continues to experience some major macroeconomic challenges,” says Kafil Merchant, a research analyst at IDC. “Additionally, the introduction of an expat dependent tax has caused a further tightening of disposable income in the country, with many people now looking to leave the kingdom or having already done so.”

The vendor landscape for feature phones continues to be dominated by Nokia, with the vendor garnering 87% share of the GCC market in Q4 2017. Samsung continued to lead the smartphone space with 31% share, while Apple followed in second place with 27.1% share – its biggest ever slice of the GCC smartphone market. This also represents the smallest gap between the two giants since 2011. Huawei ranked third with 13.4% share, with various other brands such as OPPO and Xaiomi, also actively trying to make headway in the region. However, beyond the top three it is a very fragmented market and hard for any brand to really differentiate itself enough to capture significant share.

“The final quarter of the year is usually a good one for Apple; however, this time it has been one of its best ever quarters due to the positive consumer response to the iPhone X,” says Nabila Popal, senior research manager for mobile phones, AR/VR, and displays at IDC. “Despite its high price, much fanfare greeted the iPhone X’s launch in the region, with many consumers eager to purchase the model for its innovative features and the prestige it carries. However, I do not believe this high level of demand will be sustained beyond the initial buzz of excitement that tends to greet the ‘latest and greatest’ gadget in this region, so Apple’s share is unlikely to remain so high over the longer term.”

Looking ahead, IDC expects the overall GCC mobile phone market to decline 6.3% YoY in 2018, as a result of sharp downturns in Saudi Arabia, Qatar, and the UAE caused by the challenging macroeconomic environment. The recent introduction of VAT in Saudi Arabia and the UAE has put a further strain on consumer spending, and it will take some time for the market to adjust to this change and for consumer purchasing behavior to return to normal.